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London, 02 August 2018 -- Moody's Investors Service ("Moody's") has today changed
to stable from negative the outlook on Caa2 long-term local-
and foreign currency deposit ratings of Russian Standard Bank (RSB) and
affirmed these ratings. Concurrently, the rating agency affirmed
the bank's Baseline Credit Assessment (BCA) and adjusted BCA of
caa2, its long-term and short-term local and foreign
currency Counterparty Risk Ratings of Caa1/Not Prime, as well as
its Not Prime short-term local and foreign currency deposit ratings.
RSB's long-term and short-term Counterparty Risk Assessments
(CR Assessments) of Caa1(cr)/Not-Prime(cr) were also affirmed.

A full list of affected ratings can be found at the end of this press
release.

RATINGS RATIONALE

According to the rating agency, the change of RSB's ratings
outlook to stable from negative reflects an improvement of the bank's
asset quality and profitability metrics. At the same time,
the affirmation of RSB's standalone BCA at caa2, leading to affirmation
of all of the bank's other ratings, reflects the persisting
weakness of the bank's capital level and its exposure to related parties.

As of 31 March 2018, RSB's problem loans decreased to 16.4%
of the bank's gross loan book from 19.7% as of year-end
2016. Credit losses (defined as loan-loss provisions as
a percentage of average gross loans) moderated to 4.4% (annualised)
in the first quarter of 2018 from 9.7% in 2017 and 11.8%
in 2016. Adoption of IFRS 9 resulted in improvement of the coverage
of problem loans by loan loss reserves to 111% as of 31 March 2018
from 93% reported at the end of 2017.

In the first quarter of 2018 and in 2017, Russian Standard Bank
posted net IFRS income of RUB1.0 billion and RUB2.4 billion,
respectively, versus net IFRS loss of RUB33 billion accumulated
for the period of 2014-16. The bank's return on average
assets (ROAA) improved to 1.3% (annualised) in the first
quarter of 2018 from 0.8% in 2017. The main driver
behind the improvement is the bank's reducing credit losses.
Moody's expects RSB to sustain profitable performance in the next
12 to 18 months, which will alleviate pressure on the bank's
capital.

As of 31 March 2018, RSB's tangible common equity, Moody's
preferred measure of capitalization, remained negative being pressured
by large volume of deferred tax assets, which, in accordance
with Moody's methodology, are deductible from capital due
to their limited ability to absorb losses. RSB's capital is also
affected by the bank's material exposure to related parties, through
both lending transactions and investments in fixed-income and equity
instruments issued by related and affiliated entities, which in
aggregate exceeds the bank's shareholders' equity.

According to rating agency, RSB's funding structure and liquidity
position are stable. Over the past three years, the bank's
reliance on market finance for funding loans declined significantly,
and the market funding sources were substituted by granular deposits from
individuals. The bank's loan-to-deposit ratio
has been hovering around 60% in 2016-1H2018. In addition,
RSB's liquidity buffer adjusted for encumbered assets amounted to
20% of its total banking assets as of 31 March 2018, a comfortable
level, taking into account a relatively quick turnover of the bank's
retail loan book.

WHAT COULD MOVE THE RATINGS UP / DOWN

RSB's standalone BCA and long-term ratings could be upgraded
if the bank makes visible progress in improving its weak capital metrics
and reducing its exposure to related parties, while simultaneously
improving asset quality and sustaining good profitability metrics and
stable funding and liquidity profiles.

RSB's ratings might be downgraded, or the rating outlook might
be revised to negative from stable, in case of the bank's
failure to sustain the long-term improving trends in its solvency
metrics. Any material further increase in related-party
exposures may also drive negative rating actions.

The principal methodology used in these ratings was Banks published in
August 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.

Headquartered in Moscow, Russia, Russian Standard Bank reported
-- at 31 March 2018 - total assets of RUB312 billion and total
shareholder equity of RUB15 billion, according to its unaudited
financial statements prepared under IFRS. The bank's IFRS net profits
for the first quarter of 2018 was RUB1.0 billion, and for
full-year 2017 - RUB2.4 billion.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.

Please see www.moodys.com for any updates on changes to
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the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.

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